If inventory is being valued at cost and the price level is steadily rising, the method of costing that will yield the highest net income is
A) periodic
B) LIFO
C) FIFO
D) average cost

Question

Quizplus · Accepted Answer

FIFO assumes that the first (oldest) units purchased are the first ones sold, so those units are valued at the lower cost, resulting in a higher net income in a rising price environment. LIFO assumes the opposite, which would result in lower net income. Average cost would also result in lower net income in a rising price environment. Therefore, FIFO is the best choice.

If Inventory Is Being Valued at Cost and the Price